‘Irrelevant’ and Other Dirty Words: The State Of Advertising Agencies

This post was originally posted at MediaPost. Three “posts.” Go figure.

A little while ago, we decided to test the strange vibes we’ve been feeling in the ad business by asking marketers and agencies an open-ended question about how they perceive agencies. The results of our not-at-all-scientific-but-definitely-feels-true survey: agencies are increasingly irrelevant.  

“Irrelevant” is like a jump-scare in a horror movie, right? That’s the word that came up most. Yes, that sounds all doom and gloom. However we see opportunities for advertising agencies in this dismal account. Consider it advice we’re giving ourselves, too.  

The responses clearly reflected the shift advertising agencies are experiencing in 2024 away from Agency Of Record relationships and towards project work. We’re hearing it’s more difficult for agencies to project revenue, to staff their agency, and to gain a deep understanding of a client’s business beyond the project at hand. Some even feel reduced to order takers.  

Some of that shift comes from pressure above from consulting companies, and below from freelance talent. There are deeper reasons at work, too. “Agencies are commoditized, overpriced, and too layered,” one respondent said. “They are not part of the day-to-day oxygen of brands and the distance from the agency to the brand in terms of relevance will make them extinct.”  

That directly ties into another point: as AOR relationships go away, relationships in general suffer. Or, as one person put it, “Loyalty is an old-school concept.” There are companies out there whose entire business model revolves around helping advertising agencies better manage their client relationships. It’s an industry unto itself. But projects, combined with the fact that clients are moving from one company to the next constantly, has agencies questioning the power and significance of loyalty (in either direction).   

“We’re hungry for long-term relationships with clients who bring us business problems and trust us to bring them a creative and strategic solution,” one person said.  

Results have always been important to both clients and agencies. But the advent of digital (in general) and of ever more sophisticated and real-time analytics capabilities has made it easy for clients to fixate on short-term results. From the responses, we get the sense fewer clients care about the long-term brand anymore. It’s all about “feeding the social media beast.” Related — and this is our own speculation — given the short tenure of CMOs these days, they need results at their current jobs fast to help rationalize the next big job. For agencies, we’re hearing all of this means less time to create and craft what’s created.  

“Our role is no longer to create brand heat and build brand love, our role has become to drive sales, one person said. In other words:  “KPIs. KPIs. KPIs.”  

Short-term results lead to the lowering of the bar creatively in order to satiate the marketplace with more content. Good enough is good enough (sorry, Jay Chiat). It’s more about getting something — anything — out there in order to test it, learn, and optimize from there. Artificial Intelligence seems to be accelerating the acceptance of passable creativity.   

And about AI: there’s nothing artificial about its effect on the advertising industry. Clients seem giddy at the prospects of getting “concepts” as quickly as it takes to refresh a web page. Many of our respondents feel that the use of AI does not replace what Actual Intelligence from human beings can and should be bringing to their clients. “We forgot we get paid for our taste level and experience, so we’ve raced ourselves to the bottom,” one respondent said.   

While the outlook for advertising agencies from our respondents are pretty grim, we have been thinking about how agencies can, and should, respond. What follows are several opportunities that we will soon be deploying ourselves.  

Be strategic partners in navigating marketplace complexities.  

Given the complexities of digital and AI and media proliferation, be strategic partners in navigating these complexities of modern marketing. Clients don’t have time to do this and it can get overwhelming. It’ll require agility and adaptability to stay relevant and effective, but we think clients will appreciate a go-to expert on the changing world.   

Loyalty is to the individual client now, not the client’s company.   

We think it’s time to admit your client relationships are “nomadic relationships.” Invest in the individual relationships, never forget anyone, always stay in touch. Be the best part of your clients’ days, understand their personalities, what they like and don’t like, and create a shorthand with them getting work done faster. When they move on to their next opportunity (and they will), stay close and check in frequently. Success in this regard will increase the odds that your agency will be on the receiving end of “political hires.”  

Look beyond marketing.  

Can the creativity and ingenuity of the advertising world be applied to other verticals beyond just marketing? Advertising is but one outlet for creative thinking, so why limit ourselves? We admit we haven’t completely cracked this angle yet, but we’re thinking a lot about it. Hollywood needs plot ideas for sitcoms, late night hosts need jokes, politicians need ideas to solve issues in the communities they serve, it goes on and on.  

Build your agency for project work.  

Instead of suffering through project work, agencies need to admit the reality and build their agencies around it. Find the right balance between hired staff and freelance help. Pre-vet a pool of freelancers and specialists so you can bring them in on a moment’s notice. Explore offshoring, nearshoring, and AI to keep your costs down while maintaining creative integrity. Charge for “single unit pricing,” which is the opposite of a volume discount. Look to “productize” all the things you can do, and share that “menu” — and the prices for it — with clients. We believe it’s time for agencies to quit complaining and kiss project work on the lips.  

Postscript  

The moral to this story is this: creative agencies need to get creative to survive. Get creative with their services, how they staff, how they produce work, and even their business models. But we also need to stiffen our backs a bit. If clients want more project work, more content, and faster results, that’s fine. But it’s going to cost more than a typical AOR relationship would cost. We should not be afraid to stand up to clients and make our case. It’s not gouging, it’s just good business sense.